zzlangerhans (99.81)

The GBMB in review, part II

16

I’ve decided to review the first year of my GBMB strategy. On Saturday I wrote about stocks that I bought and already sold. Today I’m going to take a look at the ones I’m still holding in the GBMB account with respect to the prices when I reviewed the stocks (PR), buy thresholds (BT), the actual buy prices (BP), the nadirs after I bought (N), and the current price (CP).

BioDelivery Sciences (BDSI) – PR 4.15, BT 4, BP 3.95, N 2.13, CP 3.55. BioDelivery suffered badly during the spring dip of 2010, due to ongoing minimal revenues from Onsolis and a lack of positive catalysts. Last July the decline looked bottomless but things have been looking up in 2011. As I’ve said previously, I consider this trade to have been an error as I had only a weak understanding of the pipeline. However, Onsolis revenues can’t go down further and other upcoming catalysts in 2011 are more likely to be positive than negative. I may escape from this play with a profit yet, but I doubt I’ll be holding long-term.

RTI Biologics (RTIX) – PR 3.28, BT 3, BP 2.95, N 2.09, CP 2.79. Interestingly, RTI shot almost directly upward to 4.5 shortly after I reviewed them. When they came crashing back down I made sure not to miss the opportunity again, but the stub continued dropping to below 50% of recent highs, despite an absence of negative catalysts. The share price rebounded in the fall but has been quivering in the high 2’s for months. The company’s unexplained predictions of decreased year-over-year revenues in 2011 may be keeping a lid on the share price. I’m still holding for another spike like we saw last spring, but as with BioDelivery I’m not planning to ride this up very far.

Anadys (ANDS) – PR 2.01, BT 1.9, BP 1.65 & 1.15, N 0.93, CP 1.23. Despite being down I don’t feel like I’ve made a mistake with Anadys, except for being convinced there was 48 week data coming from the phase IIa trial. I still can’t figure out what happened with that. But the dilution is in and the phase IIb trial is in progress with 8 week data expected by the end of Q2. Lately, hep C data has been a big positive catalyst (see Inhibitex) and I’m hoping that initial phase IIb data will bring a little attention back to Anadys. If I do see a bump I’m going to try to hold on for a big gain – after doubling down I have 10000 shares.

Discovery Labs (DSCO) – PR 7.65, BT 8.25, BP (cost-averaged) 4.31, N 1.75, CP 1.9. This was a high-stakes gamble, and at the moment I’m certainly looking the worse for wear. My thesis was based on resubmission of the Surfaxin NDA in Q1 2011, and if that had actually occurred I’d be looking pretty good right now. What happened instead is that the company diluted again, reverse-split, announced a six-month delay, and diluted yet again. If they submit the Surfaxin NDA in Q3 as planned, I could still escape from this sour trade. Of course, I really have no idea if they will. They may be hiding the fact that they simply can’t keep the compound stable and are just trying to extend their survival through dilution indefinitely. I doubt I’ll ever buy another share of Discovery or recommend the stock again. Buyer beware.

Idera (IDRA) – PR 4.2, BT 4, BP 3.15 & 2.95, N 2.36, CP 2.65. I actually bought and sold Idera once for a profit, and thought I was getting a steal at 3.15. 2.95 in retrospect seems like a silly price to have doubled down at. I still see Idera as significantly undervalued given their three compounds in phase II, but the company has been frustratingly short of catalysts for the last year. Hopefully some positive data will come out of the phase II trial of IMO-2125 in hep C towars the end of the year, before the next round of dilution.

Myrexis (MYRX) – PR 4.01, BT 4, BP 3.85, N 3.57, CP 3.85. Myrexis isn’t as compelling a cash play as they were when I bought the stock, but it’s still one of the few biotechs where cash outpaces market cap. Sadly, the pipeline hasn’t generated any catalysts and the stock has been quiescent. I’m planning on holding through ASCO in June just in case there’s a run-up on optimism for Azixa or MPC-3100. If no run-up, I’ll try and sell for a small gain.

Vical (VICL) – PR 2.2, BT 2, BP 1.9, N 1.74, CP 2.91. Vical is the first stock in which I benfited by learning from my mistakes. The driver of the two-month run-up from the nadir is almost certainly the phase III trial of Allovectin-7 in melanoma, which won’t report topline data until H2 2011. That’s a lot of time for the share price to rise even higher, and I’m planning to hold unless the price retraces below 2.5. If I hadn’t recorded those missed gains on other GBMB stocks, I would have taken profits on Vical at about 2.3. It will be very interesting to see how this story ends.

Alimera (ALIM) – PR 9, BT 9, BP 9, N 6.93, CP 8.01. Alimera had an early peak at 10.3 after I bought my shares, and I resisted the urge to sell only to be punished by a decline under 7 on somewhat disappointing three year data from the FAME trial. I’m still expecting the stock to rebound eventually as the company has indicated they will resubmit their NDA as previously planned. Doubts about the new data may cut into the eventual peak, but I’m confident that will still be substantially higher than my buy-in price.

Savient (SVNT) – PR 10.2, BT 10, BP 9.85, N 9.15, CP 10.72. A lot of people will be watching for the initial Krystezza sales numbers over the next few months, including several potential acquirers. Unless the drug completely bombs, I expect the share price to continue moving up from here and I’m not even thinking about selling. I’m going to try to redeem myself with Savient for my huge mistake in selling Optimer.

The last part of this series will deal with the GBMB companies I never bought, and hopefully some overall insight into the strategy.

I too am in the hole with DSCO. I made a huge mistake in not taking at least a fraction off the table when it ran up before the reverse-split (I must've deluded myself that it was the beginning of a sustained run-up). Let us hope that there aren't any more delays, but to be honest I am not too optimistic.

Don't feel bad about DSCO. I'm still an investor in that company too, and to me I still like idea behind their treatment. But, I think they are less than clear about what their ongoing "interactions" with the FDA really are about.